English China Clays ready for acquisitions

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The Independent Online
Five years of restructuring are almost at an end at English China Clays, which is on the lookout for acquisitions to expand its new speciality chemicals division.

Andrew Teare, chief executive, yesterday indicated the paper coatings and chemicals group was ready to move to a more aggressive stance after a period of retrenchment that began when he took over the top job in 1990.

Reporting a 5.8 per cent uptick in 1994 pre-tax profits to £93m - a figure littered with rationalisation costs and complicated by last summer's demerger of the Camas building materials division - Mr Teare said there was now "pretty much nothing else to restructure".

He said he was happy with gearing which fell to 33 per cent at the year- end in December. "It's fine. We can finance most of the things we could conceive of at the moment out of cash flow and our own resources."

Now was "not a bad moment" to put more leverage onto the balance sheet, with the paper cycle improving, he said. Calgon, the US speciality chemicals company for which ECC paid Merck $300m in 1993, had the technical strengths to support a much bigger business.

Martin Bomford, an ECC watcher at the brokers Barclays de Zoete Wedd, said the company was likely to look to Europe for acquisitions, which looked set to fall into the £30m to £100m bracket.

But another analyst commented that ECC was likely to find it pretty hard to find chemical companies to buy at a decent price Although Mr Bomford has raised his forecast for the current year from £101m to £104m, ahead of land sale profits, the shares slumped 20p to 339p after the latest results disappointed some analysts.

The figures reflected the benefits of the cost-reduction programme and the upturn in the paper cycle, which boosted volumes and has allowed ECC to push through average price rises of 3 per cent in the first quarter of 1995.

Stripping out Camas and the £4.4m cost of its demerger, group operating profits rose 22 per cent to £110m. Europe contributed the lion's share.

Earnings per share edged down to 20.05p from 20.34p. The final dividend of 10.9p makes 16.25p for the year, in line with the demerger forecast, and compares with 20p last time.